Trustee Duties

Question 1

What type of duty do trustees have?

Answer 1

A fiduciary duty - a duty of trust to act in the best interest of the beneficiaries.

Question 2

What must trustees avoid?

Answer 2

Must avoid any conflicts of interests with their own intersts

Question 3

Do the trustees have a duty to not profit from the trust?

Answer 3

Yes, a trustee cannot put themselves in a position where their duty conflicts with personal interests

Question 4

Can a trsutee purchase trust property>?

Answer 4

No they cannot purchase property owned by the trust.

Question 5

What is the duty to observe the terms of the trust?

Answer 5

Settlor may have set out that the trustees have additional duties or powers

Question 6

What is the duty to exercise reasonable care?

Answer 6

Trustees must meet the standard of care expected of them when exercising their duties and discretion.

Question 7

What is the duty to act unanimously?

Answer 7

If there is more than 1 trustee then when carrying out their duties, all trustees must act unanimously when exercising their discretion.

Question 8

What is the duty to act personally?

Answer 8

Trustees must not delegtae decision making powers

Question 9

What can a trustee delegate?

Answer 9

1.purley administartive functions - eg the preparation of tax accounts
2. Investment decisions in some cases
3. All their duties and functions if they execute a power of attorney for a fixed term up to 12 months.

Question 10

What is the duty to take possession of trust property?

Answer 10

Must ensure that the trust property is in their joint possession and control - should not be in the control of just one trustee as if it is stolen then all trustees are liable.

Question 11

What is the duty to keep accounts and disclose information?

Answer 11

Trustees must keep accounts and records and produce them and send them to the ebenficiaries when requested.

Question 12

What is the duty to act impartially?

Answer 12

Must act impartially between the beneficiaries unless the trust deed states otherwise
Eg if there are two beneficiaries, one with a right to income and one with a right to capital - they must ensure the property is income producing and does not decrease in value.

Question 13

What is the duty of confidentiality?

Answer 13

Must keep information obtained in the course of the trust confidential

Question 14

What is the duty to invest?

Answer 14

Must invest the funds to produce an income.

Question 15

What happens to the fees recieved for being a trustee?

Answer 15

The payment paid to the trustee will be held on a constructive trust for the beneficiaries.

Question 16

What happens to the fees gained as by the trustee being a director for a comnpany?

Answer 16

The fees gained will be held under a constructive trust for the benficiaries

Question 17

What happens if a trustee makes a profit from information or an opportunity recievened as a trustee?

Answer 17

The profit they made will be held on constructive trust for the benficiaries.

Question 18

Can a trustee charge for their services

Answer 18

No cannot charge a fee for their trustee services

Question 19

Can a trustees out of pocket expenses be recovered eg travel related to the trust

Answer 19

Yes.

Question 20

When can a trustee charge for their services?

Answer 20

1. Charging clause in the trust deed permitting them to charge a fee
2. They are professional trustees
3. They are a trust corporation
4. All the ebenficiaries are over 18 and have full capcity they can allow a agree to let a trustee recieve payment.
5. The court authorises payment

Question 21

What is the rule on self dealing?

Answer 21

The trustee cannot purchase property that is owned by the trust and any purchase is voidable by the ebneficiaries.

Question 22

When may the court allow self dealing?

Answer 22

If the trustee was open and honest about the self dealing and the self dealing benefitted the beneficiaries it MAY be allowed.

Question 23

What must a trustee show in order for a purchase of trust property not to be void

Answer 23

1. They paid a fair price for the beneficial interest
2. Made full disclosure of all the facts to the beneficiary
3. They have not abused their position.

Question 24

What is the statutory duty of care?

Answer 24

The trustee must exercise such care and skill as is reasonable in the circumstances having regard to:
1. Any special knowledge or experience that the trustee has
And
2. If he acts in the course of a business or profession, to any special knowledge or experience that is reasonable to expect a person acting in the course of that kind of business or profession to have.

Question 25

What if the statutory duty of care does not apply?

Answer 25

The general standard of care will apply

Question 26

In terms of the truste investing, will the trustee act 2000 or the trust deed override?

Answer 26

The trust deed will override the act in terms of investing - eg not to invest in alcahol.

Question 27

What 4 steps must trustees do when investing?

Answer 27

1. Only select investments that are authorised by statute or the trust deed
2. Take into account the standard investment criteria
3. Obtain proper advice
4. Keep the investments under review

Question 28

How can a trustee delegtae their investment duties

Answer 28

Have the power to delegtate the choice of investments to an ASSET MANAGER

Question 29

Will a trustee be liable for the performance of investments made by the asset manager?

Answer 29

No, providing they have complied with their duties.

Question 30

What is the standard investment criteria?

Answer 30

1. The suitability of the type of investment to the trust eg not long term investment for a short term trust
2. Must diversify the investments as much as appropriate.

Question 31

What is the general power of investment the trustes have?

Answer 31

They may make any type of investments as if they were absoluetely entitled to the assets EXCEPT FOR LAND

Question 32

What type of land can trustees acquire?

Answer 32

Only land in the UK.

Question 33

What are the requirments for proper advice?

Answer 33

1. The trustee must reasonable believe the person is qualified to give advice on their ability and experience.
2. Beleief must be geniune and reasonably held
3. Adviser does not need to be a professional

Question 34

What does it mean for the trustees to review?

Answer 34

Trustees must review and consider whether any changes to the investment will be needed based on the standard investment criteria.

Question 35

When should ethical investment be required?

Answer 35

If the trust deed sets out that investment should be ethical.